Could Anti-Globalization Threaten Interest In Blockchain?

Geopolitical forces are pounding down on supply chains as businesses large and small boost their trading presences across new borders. Supply chain managers are watching those forces particularly close this year, analysts say. Research announced last week from Marsh & McLennan Companies found that 52 percent of treasury management and finance professionals are watching geopolitical events and how they impact corporate growth.

Effects on business operations, such as supply chain disruptions, researchers for the 2017 Association for Financial Professionals Risk Survey found, are among the largest factors of earnings uncertainty.

“Given the rise in geopolitical instability and other global risks, forward-thinking financial leaders and treasurers must focus on helping their organizations understand the potential impact of uncertain events on business strategies, operations and supply chains,” said Alex Wittenberg, executive director of Marsh & McLennan Companies’ Global Risk Center, in a statement.

It’s given rise to a recent trend among international traders: the anti-globalization movement.

A report by supply chain and business intelligence firm eft released this month looked more closely at this phenomenon for its latest Supply Chain Hot Trends report. Analysts found that 51 percent of supply chain professionals do agree that there is an anti-globalization movement brewing in their industry that leads to a slowing down of international trade. Most attribute that deceleration to global economic instability, though more than a fifth said increased protectionist attitudes have contributed to the trend.

“The anti-globalization movement is a movement against global free trade in favor of protectionism for domestic production,” explained Haley Garner, eft research director, in a recent interview with PYMNTS. “It likely exists because of the shifts in manufacturing jobs away from traditional manufacturing hubs, a backlash against what is perceived as unfair trade practices, increased discrepancy in wealth distribution and the polarization of the issue.”

From trade agreements, to discrepancies in trade regulation across barriers, to political attitudes towards international trade, the anti-globalization movement certainly has geopolitical roots. And whether these professionals believe in the anti-globalization movement or not, eft concluded that, “either way, trade looks like it will become less free and open.”

That even split between those supply chain professionals that see an anti-globalization movement brewing and those that simply see a decline in global trade was one of the findings of eft’s report that surprised Garner most, he said.

Impact On FinTech Investment

The deceleration of global trade could offer insight as to why most (52.3 percent) of supply chain professionals told eft they aren’t looking into the application of blockchain for their companies.

Distributed ledgers have dozens of potential use cases, but among the most commonly cited is the possibility for the tool to disrupt the cross-border trade, payments and trade finance space. A shrinking of the cross-border trade space may mean supply chain professionals see no need to innovate in technologies that would apply specifically to global trade.

But Garner said another issue can be at work here: Eft found that 24 percent of those surveyed are not familiar with blockchain at all.

“One of the biggest drivers of the education gap is that blockchain comes from outside of supply chain,” Garner explained. “In addition, it’s a new technology regardless of industry, with a number of unanswered questions pertaining to it.”

But, he continued, that doesn’t mean there isn’t a role blockchain may play in disrupting the supply chain management industry.

“This education shortfall is going to be shortlived as investment and time is spent in the space by supply chain experts,” Garner noted.

Indeed, for the nearly half of supply chain professionals interested in integrating blockchain solutions, the most common application they’re looking at is the transfer of data between supply chain partners (24 percent). Payments, especially for SMEs, is also of high interest.

Garner noted that eft hasn’t yet focused too much on cross-border payments innovation in its research and analysis. But, with so many professionals looking at blockchain for payments-related use cases, it’s an area supply chain industry stakeholders will have to watch.

“The order-to-cash process is also transforming quickly as consumers and customers are much more involved in the process, given the tools at their disposal,” the research director said. “Blockchain, though, could have a totally transformative effect on how payments are processed in supply chain.”

Still, with early talk of an anti-globalization movement, it is unclear just how much blockchain could disrupt supply chain payments, with many analysts and investors eying the technology to disrupt cross-border payments and data transfer in particular. Garner added that the anti-globalization movement isn’t yet an immediate threat on cross-border trade – or innovation.

“I do’t see the anti-globalization movement being that sudden, abrupt or all-encompassing,” the executive said. “Unless consumer habits drastically change, there will still be significant demand for goods from other countries. Anti-globalization won’t champion blockchain, but I don’t think it will stop it dead in its tracks.”